When it comes to building the "next Silicon Valley," Steve Geiger is an old hand.
Before his current gig, which involves trying to hitch Russia's economy to the high-tech wagon, Geiger spent several years trying do the same for Abu Dhabi. Then, 14 months ago, he became chief operating officer for the Skolkovo Foundation, a government-backed organization charged with building a whole high-tech city in Russia and a robust innovation ecosystem around it.
Brimming with the requisite optimism, Geiger also knows the reality. Every region these days seems to be trying to replicate the Silicon Valley. All of them fall short.
"It's foolish to think you can come and cut-and-paste Silicon Valley," he said. "Silicon Valley is not a place. It's a culture. It's an attitude."
But don't write off Russia. Not yet. Because besides a clear-eyed approach to the challenges, this effort has something else: A gobsmacking barrel of money courtesy of the Russian government. About $14 billion, actually.
And that money is now finding its way into pockets across Silicon Valley. Academics. Entrepreneurs. Venture capitalists. Just a trickle for the moment, but Russian techies would be happy to open the spigot even wider if only we'd take it. Aside from attracting the ideas and energy necessary to spur innovation, backers hope the money will buy something even more valuable: Credibility in Silicon Valley.
Geiger was in town last week along with a legion of Russian techies attending the ninth annual Global Technology Symposium in Menlo Park, which brings together entrepreneurs, investors and international economic development officials.
The Skolkovo effort started a couple of years ago to diversify and modernize a Russian economy that is heavily reliant on natural resources. Russian officials announced plans to build a high-tech city in Skolkovo, a town about 10 miles west of Moscow. The program is being overseen by the Skolkovo Foundation, which boasts former Intel CEO Craig Barrett as co-chairman.
Geiger says the Russian government has committed $4 billion to the foundation. That money, in turn, is being used to build the infrastructure for the city, to create a high-tech university in partnership with MIT, and to invest in startups. In other words, the three pillars of the Silicon Valley playbook.
Skolkovo has attracted 15 tech companies who have spent a combined $450 million building R&D centers. That now includes Cisco Systems, which on Wednesday announced it had formally committed to begin building its own facility in Skolkovo, an investment the company said could reach up to $1 billion over time.
In addition, the foundation has been beefing up its academic cred by offering research funding to Bay Area scientists and engineers who develop joint projects with Russian scientists. Geiger says this part has been perhaps the easiest sell because the country has a strong stable of globally respected researchers.
The third piece, the startups, is where challenges arise. Lacking a serious venture capital industry, the government has essentially created one. With a vengeance.
In a little over a year, the foundation has provided $200 million in grants to 400 startups. Those include some in Silicon Valley such as Palo Alto-based Zingaya, which was founded by Russian immigrants. Skolkovo will invest in any startup that agrees to do at least some of its business in Russia, Geiger said.
"We're talking a startup a day," Geiger said. "I challenge any organization in the world to match that. Are they all going to be the next Google? No. But you've got to kick-start things and create buzz and some optimism. You're dealing with a very cynical population."
But wait, there's more. Because notice I called these "grants" and not "investments." See, the Skolkovo Foundation will provide grants to match investments from entrepreneurs and venture capitalists, and asks for no ownership in return. These grants could range in size from 100 percent at the seed round, which requires no match, to 25 percent in latter stages.
Beside trying to boost startups, the program is designed to entice venture capitalists into the Russian market. So far, Skolkovo has signed up 27 venture firms, but only three from the U.S., including Bessemer Venture Partners, which just announced it had joined last week. Given concerns over corruption and instability, Geiger says, selling the VCs has been the toughest challenge.
"Getting the international blue-chip VCs is tough," he said. "We're competing with every region in the world."
But remember, the Russian government is all in. And to that end, it's backed a whole separate venture firm called Rusnano with $5 billion in cash and another $5 billion in debt. And with Rusnano about to sell shares in its fund, that $10 billion pot is going to get bigger, according to Dmitry Akhanov, Rusnano's president and CEO, who moved to Silicon Valley last year and opened a full-time office on Sand Hill Road.
Rusnano focuses on nanotechnology and has invested $600 million in 14 U.S. companies, including BrightSource Energy of Oakland.
"We want to partner with Silicon Valley and the Silicon Valley ecosystem," Akhanov said.
Is it enough to change minds about Russia? Alexandra Johnson, managing director of a Russian venture fund for Draper Fisher Jurvetson who started the symposium nine years ago, believes it's a good start. She sees attitudes toward Russia shifting. If it can demonstrate a series of startup successes, the VCs will follow.
"The thing about VCs, there's a herd mentality," Johnson said. "Everyone wants to be in the same place. We will go where we see the possibility of returns. So Russia just has to show them successes and they will come."
Source: MercuryNews.Com